Media—"Data Lords: The Real Story of Big Data, Facebook and the Future of News"

I don't know but having spent some time trying to front run Sand Hill
Road and understand things like Uber I have to say this is an
interesting insight.
From Talking Points Memo, November 17:There’s a Digital Media Crash. But No One Will Say It...

And here's the latest from Talking Points Memo:

This afternoon I saw a friend on Twitter say that he doesn’t
buy the idea that if people just paid Facebook some sort of fee the
data and privacy issue would go away. Because he subscribes to the Times, the Post and the WSJ
and they each track his readership habits and sell that data to
advertisers or make it available to them for targeting. This is at least
partly true – I’ll discuss the ins and outs of that point in a moment.
But this is a good opportunity to discuss the real relationship between
publishers and big data. It’s actually very different than it looks.

First,
what my friend says is true. These publications are all in the data
collection and sale business. Indeed, TPM is too – not directly at all
but because of the ad networks (like Google and others) we have no
choice but to work with. The key on the main claim is that the issue is
one of diversity of revenue streams. Each of those big publications
mentioned has at least three big revenue sources that are relevant to
this conversation. They have premium advertisers for which the kind of
data we’re talking about has limited importance. They also have
subscriptions. The final bucket is made up of advertising that is
heavily reliant on data and targeting.

The difference is that Facebook is almost 100% reliant on
advertising which is not only reliant on data and targeting but reliant
on the most aggressive kinds of data collection, tracking and targeting. That is Facebook’s entire business. Anything that cuts deeply into that model and advantage represents an existential threat.

But
here’s the really salient point. Almost every publication participates
in the data economy. But the data economy is almost universally a bad
thing for publications, especially ones that have real audiences.

Allow me to explain.
Different
publications have different kinds of audiences. If you want to sell
consumer goods to a mass audience, you might advertise in People magazine or Yahoo News. If you want to advertise to affluent investors you might advertise on WSJ or Barron’s.
If you want to advertise to highly educated progressive news junkies
who are what ad industry types call ‘opinion leaders’ you might
advertise on TPM.

Different publications have different
audiences and they have different relationships with those audiences.
Some have deep bonds of trust, others don’t. Historically (and
increasingly today), publications sell subscriptions. They also sell ads
which can command different rates depending the value advertisers
attach to talking to different groups of people. If you have a strong
brand and a key audience, a publication can command profitable
advertising rates because they become a kind of gatekeeper for a given
audience.

The evolution of big data, tracking, targeting and advertising over the last half dozen years has transformed this dynamic.

Let’s take a hypothetical publication, Fishing Times. In the old days, paper or digital, if you’re advertising fishing equipment, Fishing Times
is a must-buy. But tracking and targeting changes that. Now Google or
Facebook or a number of other players whose names you haven’t heard of
can target people interested in fishing or even Fishing Times readers wherever they go on the internet. Let’s call these “Fishing Times readers” collectively.

So Fishing Times’s ad department is selling access to the prime Fishing Times readership. But the Data Lords can say, ‘we can show your ad just to Fishing Times readers when they’re on Facebook, or on some meme site, on the Times or TPM
or really anywhere.’ Because the Data Lords have the data and they can
track and target you. The publication’s role as the gatekeeper to an
audience is totally undercut because the folks who control the data and
the targeting can follow those readers anywhere and purchase the ads at
the lowest price.

That’s not all. The Data Lords can also
create something called ‘look alike audiences’, a key part of what
Facebook (but by no means only Facebook) does. This means that the data
may show that people with brown eyes, Toyota Camrys, fans of Katie Perry
and chocolate milk buy the most fishing equipment and are the most
intensely loyal readers of Fishing Times. Now the Data Lords can show your ads not only to Fishing Times
readers (wherever they go on the web) but to this demographic profile
which may seem to have no connection to fishing but yet has a
demonstrated propensity to purchase fishing gear in the same way Fishing Times readers do....